PTC, ITC, or Cash Grant? An Analysis of the Choice Facing Renewable Power Projects in the United States

PDF Version Also Available for Download.

Description

Renewable power technologies are inherently capital-intensive, often (but not always) with relatively high construction costs and low operating costs. For this reason, renewable power technologies are typically more sensitive to the availability and cost of financing than are natural gas power plants, for example. In the United States, the bulk of renewable project finance in recent years has been provided by 'tax equity investors' (typically large investment banks and insurance companies) who partner with project developers through highly specialized financing structures (Bolinger, 2009; Cory et al., 2008; Harper et al., 2007). These structures have been designed primarily to capitalize on ... continued below

Creation Information

Bolinger, Mark; Wiser, Ryan; Cory, Karlynn & James, Ted March 11, 2009.

Context

This report is part of the collection entitled: Office of Scientific & Technical Information Technical Reports and was provided by UNT Libraries Government Documents Department to Digital Library, a digital repository hosted by the UNT Libraries. More information about this report can be viewed below.

Who

People and organizations associated with either the creation of this report or its content.

Publisher

Provided By

UNT Libraries Government Documents Department

Serving as both a federal and a state depository library, the UNT Libraries Government Documents Department maintains millions of items in a variety of formats. The department is a member of the FDLP Content Partnerships Program and an Affiliated Archive of the National Archives.

Contact Us

What

Descriptive information to help identify this report. Follow the links below to find similar items on the Digital Library.

Description

Renewable power technologies are inherently capital-intensive, often (but not always) with relatively high construction costs and low operating costs. For this reason, renewable power technologies are typically more sensitive to the availability and cost of financing than are natural gas power plants, for example. In the United States, the bulk of renewable project finance in recent years has been provided by 'tax equity investors' (typically large investment banks and insurance companies) who partner with project developers through highly specialized financing structures (Bolinger, 2009; Cory et al., 2008; Harper et al., 2007). These structures have been designed primarily to capitalize on federal support for renewable power technologies, which has historically come in the form of tax credits and accelerated depreciation deductions. The number of tax equity investors active in the renewable power market has declined precipitously, however, as a result of the financial crisis that began unfolding across the globe in the summer of 2008. The resulting shortage and increased cost of project financing has, in turn, slowed the development of new renewable power projects, leading to layoffs throughout the entire industry supply chain. In recognition of the fact that tax-based policy incentives are not particularly effective when tax burdens are shrinking or non-existent, Congress included several provisions in 'The American Recovery and Reinvestment Act of 2009' (ARRA 2009) designed to make federal incentives for renewable power technologies more useful. Among these provisions is one that allows projects eligible to receive the production tax credit ('the PTC', see Text Box 1) to instead elect the investment tax credit ('the ITC', see Text Box 2). Another provision enables ITC-eligible projects (which now include most PTC-eligible renewable power projects) to instead receive--for a limited time only--a cash grant of equivalent value. These two provisions (among others) could have a significant impact on how renewable power projects are financed over the next few years. The purpose of this report is to both quantitatively and qualitatively analyze, from the project developer/owner perspective, the choice between the PTC and the ITC (or equivalent cash grant) for a number of different renewable power technologies.1 Because the two credits are structured differently, and apply in different ways to different technologies, the choice between the two lends itself to quantitative financial analysis of the conditions under which either the PTC or the ITC would, at least in theory, provide greater financial value. Qualitative considerations may be equally important, however, particularly in instances where quantitative differences are modest. This report proceeds as follows. Section 2 provides a brief summary of ARRA 2009, with some emphasis on those provisions designed to ease the liquidity crisis facing the renewable power sector. Section 3 describes the quantitative analysis methodology, as well as modeling results for wind, open-loop biomass, closed-loop biomass, geothermal, and landfill gas projects. Section 4 discusses a number of qualitative considerations that may play as important of a role as quantitative results in deciding between the PTC and the ITC (or equivalent cash grant). Section 5 concludes, and an Appendix provides supplemental tables that present quantitative analysis results conducted at different discount rates.

Language

Item Type

Identifier

Unique identifying numbers for this report in the Digital Library or other systems.

  • Report No.: LBNL-1642E
  • Grant Number: DE-AC02-05CH11231
  • DOI: 10.2172/950222 | External Link
  • Office of Scientific & Technical Information Report Number: 950222
  • Archival Resource Key: ark:/67531/metadc933152

Collections

This report is part of the following collection of related materials.

Office of Scientific & Technical Information Technical Reports

Reports, articles and other documents harvested from the Office of Scientific and Technical Information.

Office of Scientific and Technical Information (OSTI) is the Department of Energy (DOE) office that collects, preserves, and disseminates DOE-sponsored research and development (R&D) results that are the outcomes of R&D projects or other funded activities at DOE labs and facilities nationwide and grantees at universities and other institutions.

What responsibilities do I have when using this report?

When

Dates and time periods associated with this report.

Creation Date

  • March 11, 2009

Added to The UNT Digital Library

  • Nov. 13, 2016, 7:26 p.m.

Description Last Updated

  • Jan. 4, 2017, 5:45 p.m.

Usage Statistics

When was this report last used?

Yesterday: 0
Past 30 days: 0
Total Uses: 1

Interact With This Report

Here are some suggestions for what to do next.

Start Reading

PDF Version Also Available for Download.

International Image Interoperability Framework

IIF Logo

We support the IIIF Presentation API

Bolinger, Mark; Wiser, Ryan; Cory, Karlynn & James, Ted. PTC, ITC, or Cash Grant? An Analysis of the Choice Facing Renewable Power Projects in the United States, report, March 11, 2009; Berkeley, California. (digital.library.unt.edu/ark:/67531/metadc933152/: accessed December 14, 2018), University of North Texas Libraries, Digital Library, digital.library.unt.edu; crediting UNT Libraries Government Documents Department.